Responding to the publication recently of a White Paper by the Ministry of Defence, the think tank IPPR says it makes disappointing reading for those who believe governments must take a more activist approach in supporting industries which can be a source of future growth.

IPPR’s report on globalisation, published last week, argued that sustained growth requires activist government intervention in “sectors where Britain has or could have a comparative advantage, where global demand is most buoyant, and where market forces alone are not adequate to realise this potential” – but “without introducing distortions that undermine innovation and competition”. Hi-tech manufacturing, including Aerospace and other parts of the defence industry, were all cited.

Matt Cavanagh, IPPR Associate Director, said:

“In the current economic climate, the argument for activist support for industries with growth potential, export potential, and a concentration of high-skill manufacturing jobs, is stronger than ever. The defence industry meets these tests, supporting hundreds of thousands of jobs, many of them highly skilled.

“We need robust safeguards on the sale of defence equipment to repressive regimes – and greater transparency, to avoid any repeat of the embarrassment when the Prime Minister tried to combine a private tour in support of defence contracts with a public tour of Arab Spring states – but alongside these safeguards we need a clear government commitment to the future success of this sector.

“With unemployment at historic highs, now is the worst time to eliminate consideration of the impact on UK employment from the cost-benefit analysis of defence contracts. The government should build on examples like the recent contracts for Armoured Fighting Vehicles, which generated real competition from UK and international suppliers while also factoring in the impact on UK industry and jobs. The government must also show more ambition on R&D: 1.2% of a shrinking defence budget is nothing to boast about.

“The White Paper reinforces the impression left by the SDSR, that the government is failing to learn the real lessons of defence procurement, including the debilitating effect of inter-service rivalry, the failure to prioritise, and a lack of professionalism in specifying and managing contracts. Tackling these problems is the answer to the MoD’s historic tendency to over-spending on equipment, rather than a simplistic commitment to “buying off the shelf” in a hypothetical “open market” – which in regard to large defence equipment programmes simply doesn’t exist.”

Notes to Editors:

The recent White Paper confirms that the UK defence industry supports 300,000 jobs, many of them high quality and highly skilled, and is a major player in a global market valued at £260bn.

Peter Luff, Minister of Defence Procurement, is quoted in today’s FT saying: “the MoD would no longer consider wider employment or industrial factors as it assessed whether a piece of equipment offered value for money”.